Bank of Italy not to blame for bank collapses, governor tells parliament

ROME (Reuters) - Bank of Italy Governor Ignazio Visco on Tuesday defended his record as a custodian of local banks, telling parliament the collapse of numerous lenders was not due to careless supervision but to a deep recession and unhelpful European Union rules.

Addressing a parliamentary commission, Visco denied the central bank had acted late in preventing scandals at a string of lenders or underestimated the effect of the economic downturn on banks’ balance sheets.

“The marked deterioration of banks’ assets and the crises of recent years were above all the inevitable consequence of the deep, double-dip recession that hit the economy,” he said.

Visco also took aim at EU “bail-in” rules forcing investors to takes losses at failing banks, which Italy argued in vain should be introduced more gradually. Italy’s position was ignored by “many countries which previously intervened massively with public money to support their banks,” he said.

The commission, which was set up in September to look into the collapse of 10 Italian banks in the past two years, has become a focal point of political campaigning ahead of a national election expected to be held in March.

So far, it has hurt the ruling Democratic Party (PD) and its leader Matteo Renzi, showing one of his closest allies was active in trying to save a local bank where her father worked, allowing the opposition to allege a conflict of interest.

The PD is sliding in opinion polls and lags a center-right coalition and the anti-establishment 5-Star Movement.

The government reappointed Visco in October despite opposition from Renzi and the PD. His testimony was eagerly awaited by politicians of all stripes.

Opposition parties, led by 5-Star and the right-wing Northern League, have attacked the PD for the banking scandals in which thousands of Italians lost their savings. Renzi says the blame lies with the Bank of Italy.

In a spirited defense of the institution he has led since 2011, Visco argued that the central bank has limited scope to prevent bank scandals because its inspectors can only intervene when improper conduct at banks is already clear and established.

“In more than 120 years of our history ... the honesty and integrity of the Bank of Italy’s staff has never been found lacking,” he said.

Visco pointed the finger at “widespread failings in banks’ management of their bad loans,” and said the Bank of Italy had repeatedly told lenders to produce more timely and comprehensive information on their situation as they ran into trouble.

RENZI SNUB

He said he had declined to answer Renzi when the former prime minister tried to speak to him in 2014 about a possible interest by Banca Popolare di Vicenza in buying Banca Etruria, two local lenders which eventually collapsed.

“He asked me why Vicenza wanted to buy Etruria and talked about the (impact on) the local gold trade. I didn’t answer him, I thought he was joking,” Visco said, adding that he only spoke to Economy Minister Pier Carlo Padoan about banking supervision.

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Visco also said Renzi’s close ally, cabinet undersecretary Maria Elena Boschi, had told a Bank of Italy board member, Fabio Panetta, that she was worried about the effects of Banca Etruria’s problems on the local economy.

The opposition accuses Boschi of having a conflict of interest when she took steps to try to save Banca Etruria, based in her home town of Arezzo and where her father was a board member.

It has already emerged that Boschi, who was then minister for constitutional reforms and had no economic brief, held several meetings with bankers and regulators to try to save the lender. She denies wrongdoing.

Visco said she had not asked Panetta for any specific intervention to help Banca Etruria, or exerted any pressure.

Reporting by Giuseppe Fonte, writing by Gavin Jones; editing by Crispian Balmer and John Stonestreet